Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. $\begin{array}{|l|r|r|c|l|l|l} \hline & {\text { Actual }} & \begin{array}{c} \text { Flexible } \\ \text { Budget } \end{array} & \begin{array}{c} \text { Flexible } \\ \text { Budget } \\ \text { Variance } \end{array} & \text { U/F } & \text { \% Variance } & \text { U/F } \\ \hline \text { Sales Revenue } & \$ 688,000 & \$ 700,000 & & & & \\ \hline \text { Variable expenses } & 309,000 & 320,000 & & & \\ \hline \text { Contribution margin } & 379,000 & 380,000 & & & \\ \hline \text { Traceable fixed expenses } & 371,000 & 368,000 & & & & \\ \hline \text { Division margin } & \$ 8,000 & \$ 12,000 & & & &\\ \hline \end{array}$ How much is the percentage flexible budget variance for sales revenue?

A) 1.7 % F B) 1.7 % U C) 3.4 % U D) 3.4 % F A) 1.7 % F B) 1.7 % U C) 3.4 % U D) 3.4 % F

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. It has provided the following information. $\begin{array}{l} \text { Revenue Center Performance Report }\\ \begin{array} { | c | r | c | c | c | c | c | c | } \hline & { \text { Actual } } & \text { Flexible Budget } & & \text { Flexible } & \text { Sales Volume } & & \text { Static } \\ \hline \text { Product type: } & \text { Sales Revenue } & \text { Variance } & \text { U/F } & \text { Budget } & \text { Variance } & \text { U/F } & \text { Budget } \\ \hline 40 \text { inch } & \$ 31,500 & & & \$ 30,000 & & & \$ 40,000 \\ \hline 36 \text { inch long } & \$ 40,150 & & & \$ 42,000 & & & \$ 33,000 \\ \hline 36 \text { inch short } & \$ 36,200 & & & \$ 33,000 & & & \$ 30,000 \\ \hline 32 \text { inch } & \$ 19,000 & & & \$ 20,000 & & & \$ 28,000 \\ \hline \end{array} \end{array}$ How much is the flexible budget variance for the 40 inch pipe?

A) $1,850 U B) $3,000 F C) $10,000 U D) $1,500 F A) $1,850 U B) $3,000 F C) $10,000 U D) $1,500 F

Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. $\begin{array}{|l|r|r|c|l|l|l} \hline & {\text { Actual }} & \begin{array}{c} \text { Flexible } \\ \text { Budget } \end{array} & \begin{array}{c} \text { Flexible } \\ \text { Budget } \\ \text { Variance } \end{array} & \text { U/F } & \text { \% Variance } & \text { U/F } \\ \hline \text { Sales Revenue } & \$ 688,000 & \$ 700,000 & & & & \\ \hline \text { Variable expenses } & 309,000 & 320,000 & & & \\ \hline \text { Contribution margin } & 379,000 & 380,000 & & & \\ \hline \text { Traceable fixed expenses } & 371,000 & 368,000 & & & & \\ \hline \text { Division margin } & \$ 8,000 & \$ 12,000 & & & &\\ \hline \end{array}$ How much is the percentage flexible budget variance for traceable fixed expenses?

A) 0.8 % F B) 0.8 % U C) 0.3 % U D) 0.3 % F A) 0.8 % F B) 0.8 % U C) 0.3 % U D) 0.3 % F

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts. The direct material cost is $95 and each ceiling fan requires 2.5 hours of machine time to manufacture. Additional information is as follows: \[\begin{array} { | l | l | c | } \hline{ \text { Activity } } & { \text { Allocation Base } } & \text { Cost Allocation Rate \$ } \\ \hline \text { Materials handling } & \text { Number of parts } & 0.08 \\ \hline \text { Machining } & \text { Machine hours } & 7.20 \\ \hline \text { Assembling } & \text { Number of parts } & 0.35 \\ \hline \text { Packaging } & \text { Number of finished units } & 2.70 \\ \hline \end{array}\] What is the cost of assembling per ceiling fan?

A) $87.50 B) $7.00 C) $7.50 D) $35.00 A) $87.50 B) $7.00 C) $7.50 D) $35.00

Ace Plastics produces different kinds of products, all in one manufacturing facility. They have identified four activities for their costing system: Materials management-allocated by number of purchase orders Chemical processing-allocated on metric tons Molding-allocated on direct labor hours Packaging-allocated by number of units produced The activity rates are as follows: \[\begin{array} { | l | r | l | } \hline \text { Materials management } & \$ 12.00 & \text { Per purchase order } \\ \hline \text { Chemical processing } & \$ 7.50 & \text { Per metric ton } \\ \hline \text { Molding } & \$ 24.00 & \text { Per direct labor hour } \\ \hline \text { Packaging } & \$ 0.10 & \text { Per unit } \\ \hline \end{array}\] Engineering design shows that the order will require direct material worth $540, direct labor cost being $90, require 4 purchase orders to be placed, use 2 metric tons of chemical base, need 8 direct labor hours. The size of the order is to produce 3,000 units of product. Calculate total cost of production of the order.

Calculation of total cost of the order:

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. It has provided the following information. \[\begin{array}{l} \text { Revenue Center Performance Report }\\ \begin{array} { | c | r | c | c | c | c | c | c | } \hline & { \text { Actual } } & \text { Flexible Budget } & & \text { Flexible } & \text { Sales Volume } & & \text { Static } \\ \hline \text { Product type: } & \text { Sales Revenue } & \text { Variance } & \text { U/F } & \text { Budget } & \text { Variance } & \text { U/F } & \text { Budget } \\ \hline 40 \text { inch } & \$ 31,500 & & & \$ 30,000 & & & \$ 40,000 \\ \hline 36 \text { inch long } & \$ 40,150 & & & \$ 42,000 & & & \$ 33,000 \\ \hline 36 \text { inch short } & \$ 36,200 & & & \$ 33,000 & & & \$ 30,000 \\ \hline 32 \text { inch } & \$ 19,000 & & & \$ 20,000 & & & \$ 28,000 \\ \hline \end{array} \end{array}\] How much is the sales volume variance for the 36 inch long pipe?

A) $1,850 U B) $9,000 F C) $10,000 U D) $1,500 F A) $1,850 U B) $9,000 F C) $10,000 U D) $1,500 F

Huntswell Corporation has two major divisions: Agricultural Products and Industrial Products. It provides the following information for the year 2014 \[\begin{array} { | l | c | c | } \hline & \text { Agriculture Division } & \text { Industrial Division } \\ \hline \text { Sales revenue } & \$ 140,000 & \$ 1,040,000 \\ \hline \text { Operating income } & \$ 46,400 & \$ 220,000 \\ \hline \text { Average total assets } & \$ 300,000 & \$ 5,540,000 \\ \hline \text { Target rate of return } & 14,0 \% & 14,0 \% \\ \hline \end{array}\] Calculate the residual income for the Agriculture division.

A) $5,500 B) $4,400 C) $2,500 D) $1,800 A) $5,500 B) $4,400 C) $2,500 D) $1,800

Exam 24: Cost Allocation and Responsibility Accounting

Traditional costing systems employ multiple allocation rates, but an activity-based costing system uses only one rate for allocating manufacturing overhead.

(True/False)

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Question 41

In a decentralized company, all the planning and controlling decisions are made by the top management.

(True/False)

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Question 42

Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. Actual Flexible Budget Flexible Budget Variance U/F \% Variance U/F Sales Revenue \ 688,000 \ 700,000 Variable expenses 309,000 320,000 Contribution margin 379,000 380,000 Traceable fixed expenses 371,000 368,000 Division margin \ 8,000 \ 12,000 How much is the percentage flexible budget variance for sales revenue?

(Multiple Choice)

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Question 43

Performance evaluation systems provide top management with a framework for maintaining control over the entire organization.

(True/False)

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Question 44

Responsibility reports for a profit center includes:

(Multiple Choice)

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Question 45

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. It has provided the following information. Revenue Center Performance Report Actual Flexible Budget Flexible Sales Volume Static Product type: Sales Revenue Variance U/F Budget Variance U/F Budget 40 inch \ 31,500 \ 30,000 \ 40,000 36 inch long \ 40,150 \ 42,000 \ 33,000 36 inch short \ 36,200 \ 33,000 \ 30,000 32 inch \ 19,000 \ 20,000 \ 28,000 How much is the flexible budget variance for the 40 inch pipe?

(Multiple Choice)

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Question 46

Which of the following is an expanded form of calculating return on investment?

(Multiple Choice)

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Question 47

Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. Actual Flexible Budget Flexible Budget Variance U/F \% Variance U/F Sales Revenue \ 688,000 \ 700,000 Variable expenses 309,000 320,000 Contribution margin 379,000 380,000 Traceable fixed expenses 371,000 368,000 Division margin \ 8,000 \ 12,000 How much is the percentage flexible budget variance for traceable fixed expenses?

(Multiple Choice)

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Question 48

Smaller variances signal that operations are close to target and do not require management's immediate attention.

(True/False)

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Question 49

Which of the following would most likely be evaluated using residual income?

(Multiple Choice)

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Question 50

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts. The direct material cost is $95 and each ceiling fan requires 2.5 hours of machine time to manufacture. Additional information is as follows: Activity Allocation Base Cost Allocation Rate \ Materials handling Number of parts 0.08 Machining Machine hours 7.20 Assembling Number of parts 0.35 Packaging Number of finished units 2.70 What is the cost of assembling per ceiling fan?

(Multiple Choice)

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Question 51

Ace Plastics produces different kinds of products, all in one manufacturing facility. They have identified four activities for their costing system: Materials management-allocated by number of purchase orders Chemical processing-allocated on metric tons Molding-allocated on direct labor hours Packaging-allocated by number of units produced The activity rates are as follows: Materials management \ 12.00 Per purchase order Chemical processing \ 7.50 Per metric ton Molding \ 24.00 Per direct labor hour Packaging \ 0.10 Per unit Engineering design shows that the order will require direct material worth $540, direct labor cost being $90, require 4 purchase orders to be placed, use 2 metric tons of chemical base, need 8 direct labor hours. The size of the order is to produce 3,000 units of product. Calculate total cost of production of the order.

(Essay)

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Question 52

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. It has provided the following information. Revenue Center Performance Report Actual Flexible Budget Flexible Sales Volume Static Product type: Sales Revenue Variance U/F Budget Variance U/F Budget 40 inch \ 31,500 \ 30,000 \ 40,000 36 inch long \ 40,150 \ 42,000 \ 33,000 36 inch short \ 36,200 \ 33,000 \ 30,000 32 inch \ 19,000 \ 20,000 \ 28,000 How much is the sales volume variance for the 36 inch long pipe?

(Multiple Choice)

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Question 53

The product line of a manufacturing company is most likely to be considered as:

(Multiple Choice)

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Question 54

Huntswell Corporation has two major divisions: Agricultural Products and Industrial Products. It provides the following information for the year 2014 Agriculture Division Industrial Division Sales revenue \ 140,000 \ 1,040,000 Operating income \ 46,400 \ 220,000 Average total assets \ 300,000 \ 5,540,000 Target rate of return 14,0\% 14,0\% Calculate the residual income for the Agriculture division.

(Multiple Choice)

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Question 55

In many cases, the amount of the transfer price does not affect the overall company profits.

(True/False)

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Question 56

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

(True/False)

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Question 57

A lag indicator is a performance measure that forecasts future performance.

(True/False)

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Question 58

To evaluate the performance of an investment center, a business needs key performance indicators that measure:

(Multiple Choice)

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Question 59

When a division is operating at full capacity, the transfer price can be any of variable cost, full cost or cost plus a mark-up.

(True/False)

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Question 60

Traditional costing systems employ multiple allocation rates, but an activity-based costing system uses only one rate for allocating manufacturing overhead.

In a decentralized company, all the planning and controlling decisions are made by the top management.

Performance evaluation systems provide top management with a framework for maintaining control over the entire organization.

Responsibility reports for a profit center includes:

Which of the following is an expanded form of calculating return on investment?

Smaller variances signal that operations are close to target and do not require management's immediate attention.

Which of the following would most likely be evaluated using residual income?

The product line of a manufacturing company is most likely to be considered as:

In many cases, the amount of the transfer price does not affect the overall company profits.

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

A lag indicator is a performance measure that forecasts future performance.

To evaluate the performance of an investment center, a business needs key performance indicators that measure:

When a division is operating at full capacity, the transfer price can be any of variable cost, full cost or cost plus a mark-up.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

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